By Anna Hirtenstein and Caitlin McCabe
Investors piled into shares of economically sensitive companies and pulled back from technology stocks Monday, leading to a divergence in major indexes.
The Dow Jones Industrial Average jumped about 290 points, or 0.9%, in recent trading, putting the blue-chip index within striking distance of closing at a new all-time-high. The S&P 500 advanced 0.5% to kick off May after finishing April with its best month since November.
The Nasdaq Composite, in contrast, pulled back, falling 0.3% after opening higher. Megacap technology companies including Amazon.com, Netflix and Facebook weighed on the technology-heavy index.
Investors have been heartened lately by signals that economic growth is picking up, with recent data showing that U.S. indicators ranging from consumer spending to jobless claims are improving. Meanwhile, an exceptionally strong earnings season so far -- during which most S&P 500 companies have surpassed analysts' profit expectations -- has added to the optimism.
At the same time, however, money managers are assessing the continued spread of Covid-19 in many parts of the world and trying to gauge the outlook for inflation, which could erode the value of investment returns. Rising inflation tends to be particularly problematic for growth and tech stocks, in part because their earnings are expected to come further in the future.
"There is a thin balance between all the positives such as earnings momentum, the reopening, the rollout of vaccines and some limiting factors like [high] valuations and inflation perspectives," said Luc Filip, head of private banking investments at SYZ Private Banking. "The market will balance between all these positives and negatives, but we believe the positives will outweigh the negatives."
Investors this week will be paying attention to a busy week of corporate earnings and economic data. Companies including Pfizer, Marathon Oil and Etsy are on tap to report results this week. April jobs figures will also be reported Friday. Economists surveyed by The Wall Street Journal expect U.S. employers to have added 1 million jobs.
In comments Monday, Federal Reserve Chairman Jerome Powell noted that the U.S. economic outlook has brightened, but added that it has advanced more slowly for low-wage workers.
He noted that the pandemic has had greater effects on minority workers and women. And he said the Fed is focused on "these longstanding disparities because they weigh on the productive capacity of our economy, " according to prepared remarks for a speech to the National Community Reinvestment Coalition.
Mr. Powell included few other comments on the broader economy in his opening remarks. Fed officials voted last week to maintain the central bank's policies.
Earlier on Monday before Mr. Powell's comments, investors also parsed fresh manufacturing data from the Institute for Supply Management, which showed that its purchasing-managers index of manufacturing activity registered 60.7 in April, versus expectations of 65.0, according to estimates from a survey compiled by The Wall Street Journal. Demand expanded, the data showed. But wide-scale shortages of basic materials, rising commodities prices and difficulties in transporting products continued to affect the industry, the report showed.
In corporate news, Estee Lauder sank 7.8% after its quarterly revenue came in below analysts' estimates. In contrast, Moderna climbed about 3.3%. The drugmaker said Monday that it will supply 34 million Covid-19 vaccine doses to an international program that distributes the shots to developing countries.
Among the S&P 500's 11 sectors, the energy and materials groups posted the biggest gains. Companies including Halliburton, Gap and FedEx jumped, with each rising 5.1% or more.
In contrast, Amazon tumbled 2.3%, while Tesla lost 4%. Netflix fell 0.8% and Facebook edged down 0.5%.
In bond markets, the yield on the 10-year Treasury note ticked down to 1.607%. It ended last week at 1.632%, posting its biggest weekly rise since mid March.
Overseas, the pan-continental Stoxx Europe 600 rose 0.6%.
Hong Kong's Hang Seng Index fell 1.3%. India's Sensex index declined 0.6%, after losing 1.5% last month. Markets in Japan and China were closed for a holiday.
Write to Anna Hirtenstein at anna.hirtenstein@wsj.com and Caitlin McCabe at caitlin.mccabe@wsj.com
(END) Dow Jones Newswires
05-03-21 1532ET
